Revenue increased 23.8% to £13.7m compared to £11.1m in the first half of 2010, the  Group’s operating profit increased 36.8% to £1.04m (H1 2010: £0.76m), while its closing order book of £25.2m was nearly double the £13.9m it posted in H1 2010.

The company said that revenue from key wastewater projects secured in 2010 has driven an improvement in Group financial performance over the first six months. The record order book reported at the end of 2010 had been maintained over the first half of 2011 with the award of further major contracts in both the UK and US.  A number of key wastewater contracts have also progressed ahead of schedule.

Despite ongoing challenging trading conditions in the construction sector,  Hydro’s stormwater businesses has seen continuing growth. The company has accelerated its international expansion with the appointment of an International Business Director in June, who will take a particular focus on the opportunities presented by EU and BRIC countries.

Steve Hides, CEO of Hydro International plc, commented:

"Significant progress has been made in the half with accelerated progress on key Wastewater contracts pushing revenue, operating profit and profit before tax all well ahead of the same period last year."

"The Group remains financially strong and well placed to deal with the short term challenges posed by the current economic environment. The Board is positive about the prospects and opportunities for Hydro's solutions and products; we have a strong order book and continue to move forward with a range of new initiatives and programmes designed to deliver sustained growth in the medium term".

The Group said its improved results have been achieved against a backdrop of a challenging trading environment with widespread public sector spending cuts, water sector procurement delays and low levels of investment in the private construction sector.

£3.5M deal with Thames Water - but AMP5 delays are continuing

One of Hydro’s key UK contract wins was a £3.5million deal in February 2011 for the UK Wastewater business to supply Zickert Scraper equipment to the Thames Water sewage treatment works at Crossness in London. The contract followed on from two similar contracts awarded in 2010 at the Beckton and Mogden sites with a combined value of £19.6m. Income on the three contracts has driven a significant increase in revenue and profit from the business over the first six months of 2011. The Crossness and Mogden contracts are currently expected to be complete by the end of 2012, with the Beckton project scheduled to finish in 2014.

However, Hydro said that apart from the large Thames Water contracts, and despite a significant improvement in project proposal levels, the Group was continuing to see delays affecting projects coming through under the new Asset Management Programme, AMP5, the latest five-year periodic spending cycle for the water industry.

Hydro said the “tough parameters” for spending imposed under AMP5 by the industry regulator, OFWAT, are presenting the water companies with significant challenges in bringing through projects within budgetary constraints. The firm said this is delaying procurement at a time when the water companies typically start to gain momentum and move forward having established delivery arrangements and partners for the AMP period.

The company nevertheless remains optimistic that projects will start to come through in the second half of the year as water companies face pressure to meet operational improvement targets.

US wastewater business continues to perform well

Hydro’s  US Wastewater business is continuing to perform well. In May the firm secured a further major contract for $2.5m to supply SlurryCup™ sludge de-gritting and grit washing devices for the Point Loma Wastewater Treatment Plant in San Diego, California.

Revenues and profits in the first half were also increased over 2010 levels with the delivery, ahead of schedule, of the first of two large Storm King® units for the City of Boonville, Indiana. The Boonville contract, valued at $2.8m, was received in late 2010 and is part of a Combined Sewer Overflow (CSO) abatement programme for the city.

The US Wastewater business is continuing to progress a number of initiatives aimed at making the most of its highly effective network of independent sales representatives. The business launched the Hydro-Sludge™ Screen in the US in late 2010 and the first orders have been secured and delivered in the first half-year. The business is also planning to apply knowledge and experience gained in the UK to re-launch the Reg-U-Flo® Vortex Valve during the second half of the year into the North American municipal market for applications such as flood alleviation and sewer system control.

Opportunities stall in Middle East

In Hydro’s International Wastewater division, the Group has enjoyed considerable success over the last three years in the Middle East, particularly in Egypt, where grit removal equipment has been supplied into the Villages projects along the River Nile.

However, the company said that opportunities to build on this success have stalled as a consequence of the political unrest in the region during the spring.  Hydro remains actively engaged in discussions regarding projects in Saudi Arabia and Egypt predicting the timing of projects is a significant challenge, and most of the major wastewater treatment projects have indeterminate timelines that are expected to slip beyond 2011.

Nevertheless, recent visits to the region have produced encouraging results and the medium-term outlook appears positive with a significant number of opportunities for Hydro in both flood control and grit removal applications. Some progress was seen late in the first half with the receipt of a £300,000 Grit King® order for a project in Qatar.

UK Stormwater sees 6% revenue growth

The UK Stormwater business has shown a 6% growth in revenues when compared to the equivalent period in 2010, described by Hydro as a good performance in the context of the relatively flat UK construction market.

Hydro said the markets remain highly competitive, and the business is focussed on building on its current market-leading position with a number of initiatives aimed at extending the range and performance capability of products. These developments should further differentiate Hydro from its competition heading into 2012.

2011 saw the market launch of the Hydro Filterra™ Bioretention System which uses natural processes to remove contaminants from stormwater. Initial orders have been received and installed on site during the first half-year with further progress expected during the remainder of the year.

Outlook remains strong

Hydro said that despite a general backdrop of economic uncertainty and the effective suspension of opportunities in the Middle East, the Group remains well placed with a strong order book.

The business remains focussed on continuing the progress made over the last year to improve its commercial resources and sales channels, both in core UK and US markets, as well as on a wider international platform.